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10 Must Reads for the CRE Industry Today (May 28, 2019)

Mortgage REITs increased their mortgage bond portfolios by almost 28 percent over the past year, according to the Wall Street Journal. Amazon is looking at office space on Manhattan’s West Side, reports the New York Post. These are among today’s must reads from around the commercial real estate industry.

  1. REITs Bet Big on Mortgage Market “Real-estate investment trusts that buy residential home loans increased their mortgage-bond portfolios by almost 28% to $308 billion over the 12 months through March. It was the largest stockpile in a half-dozen years, according to an analysis of 15 REITs by industry research group Inside Mortgage Finance. Annaly Capital Management Inc. and AGNC Investment Corp., the two biggest companies in the sector, drove the majority of the growth.” (Wall Street Journal, subscription required)
  2. Amazon Is Eyeing a Return to New York City “Amazon may have bid farewell to Queens, but it still ‘hearts’ the Big Apple. After walking away from a deal to build a headquarters on the Queens waterfront in Long Island City, Amazon is back to shopping for office space on Manhattan’s West Side, sources tell The Post. The tech giant has been in talks with owners of two shiny new skyscrapers located just one block west of Penn Station — the newly built One Manhattan West and its soon-to-be sister project, Two Manhattan West, sources tell The Post.” (New York Post)
  3. Climate Change Can Pose Big Risks to Real Estate Investments “Climate change could dramatically alter the value of real estate investments. And that goes for real estate investment trusts, companies that own income-producing real estate, if they do not shift their investment strategies to address growing risks, industry experts say. A 2018 report found that 35% of REIT properties have geographic exposure to climate hazards, including inland flooding, typhoons or hurricanes, and coastal flooding and elevated sea levels. The research evaluated 73,500 properties owned by 321 REITs.” (CNBC)
  4. A Decade After the Crash, Barclays Bets Again on Bundling U.S. Home Loans “Ten years on from the global financial crisis caused by a crash in bonds tied to U.S. home loans, Britain’s Barclays is betting a return to that market can bring in bumper revenues to fortify its investment bank. After the crisis, banks initially shunned the business of selling and trading slices of loans tied to residential property, autos or commercial real estate, as such securitizations were demonized for their role in the crash. But now Barclays is preparing to make its comeback, having assembled a team of over 140 securitization bankers and traders with plans to hire more as investors clamor for the higher returns such deals offer compared with traditional stocks and bonds.” (Reuters)
  5. Rise of New Hotel Brands Irks Some Property Owners “Major hotel companies are introducing new brands at a rapid pace, a strategy that can boost revenue but one that risks confusing guests and alienating hotel owners. Five of the world’s biggest publicly traded hotel operators have launched a combined 16 new brands since 2013, including five over the past 18 months. This contrasts with past periods, when hotel companies could go years without adding a new brand. The rise of new brands reflects a push by the big lodging companies to boost their top line with new products they can market to hotel owners and collect fees from them.” (Wall Street Journal, subscription required)
  6. KBS Sells 580 KSF St. Louis Office Property “KBS has sold a 579,846-square-foot office complex in the St. Louis-area to Lingerfelt CommonWealth Partners for an undisclosed price. Pierre Laclede Center is a two-building, Class A property in Clatyon, Mo., that KBS acquired in 2010. Lingerfelt CommonWealth will own the tower through Lingerfelt CommonWealth Value Fund II, its discretionary investment vehicle.” (Commercial Property Executive)
  7. More Construction Cranes Are on the Way in Plano’s Legacy Business Park “You may have noticed that something's missing from the skyline in Plano's Legacy business park. That forest of construction cranes is mostly gone from the stretch of the Dallas North Tollway near Legacy Drive. Just a couple of office projects are still underway. Legacy West developer Karahan Cos. is building about 87,000 square feet of new offices in a mixed-use building on Headquarters Drive. And Heady Investments is building a 14-story office high-rise on the east side of the tollway near the Shops at Legacy.” (Dallas Morning News)
  8. Has #MeToo Changed Real Estate? “The sexual misconduct allegations against Richard Meier offer a telling case study for the #MeToo movement. In many ways, the mixed messages the case sent is indicative of how the movement has unfolded in the New York City real estate industry over the last year and a half. On the one hand, real estate firms are taking sexual harassment more seriously — not only because they’ve been forced to comply with new legislation, but also because they’re protecting themselves from financial liability.” (The Real Deal)
  9. Starwood Buys Jacksonville Office Portfolio for $231M “Starwood Real Estate Income Trust Inc. has acquired a 1.3 million-square-foot, 11-building Class A office portfolio in Jacksonville, Fla., for about $231 million through an off-market transaction, Starwood REIT announced. The Florida Office Portfolio is in the Deerwood Park submarket, which according to Starwood commands Jacksonville’s highest asking rents and has its lowest vacancies. The submarket reportedly offers convenient access to both executive and workforce housing and to North Florida’s most successful retail complex, St. Johns Town Center.” (Commercial Property Executive)
  10. How L.A.’s Parcel Tax Will Impact CRE Properties “Los Angeles is seeing yet another real estate-focused ballot measure. On June 4, residents will vote on Measure EE, a $0.16 tax per square foot on commercial properties to raise $500 billion over the next 12 years to support the Los Angeles Unified School District. The measure was drafted in response to recent teacher strikes, according to CoStar’s Randyl Drummer, and LAUSD says that it will use the funds to attract and pay qualified teachers. Measure EE proposes to include not only residential properties but also commercial properties such as multi-unit apartments, retail spaces, and offices.” (GlobeSt.com)
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